Angelo Gordon could mean trouble for Star Tribune

​The Star Tribune is among the papers featured in an intriguing look at the potential for hedge funds to further disrupt the already fragile business model of local daily newspapers.

The article spotlights Angelo, Gordon, & Co., a hedge fund that has quickly become a major media player in several markets, including the Twin Cities.

[B]ecause they are opportunistic traders by nature, not long-term
owners, their presence is likely to be disruptive. Their objective from
Day One will be seeking the most profitable way to turn their
investments back into cash. And that will likely mean a restless quest
for value-creating exercises like spinoffs, acquisitions,
recapitalizations and other sorts of transactions that will keep the
newspaper industry in a state of flux.

Which brings us to Angelo Gordon's local media ownership, which isn't limited to just the Star Tribune:

In Minneapolis, Angelo Gordon is an owner of the Star-Tribune, and
Alden holds a piece of MediaNews, which controls the St. Paul
Pioneer-Press.

The natural tension for funds like Angelo Gordon,
however, is that they don't have unlimited time to wait for their
investments to bear fruit. Their compensation and fee structure is
generally based on raising a fund, investing it to generate 20 to 30
percent annual returns and then monetizing those returns over a period
of a few years.

In short: Wall Street is looking for a way to make money in the
short-term, not build a business model to sustain the local paper for
future decades.

That tension may have led to a parting of the ways
between the firm and Brad Pattelli, who gained attention this year as
the architect of Angelo Gordon's extensive newspaper investments.
Neither Pattelli nor the firm would comment for this story. But John
Johnson Jr., who runs a company called Foamex International Inc. and has
sat on a number of boards for Angelo Gordon in the past, said Pattelli
was interested in business-building in the media industry, not just
trading in and out of distressed companies.

"Brad wants to move up
and have more of a say in how companies are managed," said Johnson.
"But funds have a time limit on them."

Angelo Gordon got rid of the guy who was interested in business-building rather than just trading in and out of distressed companies? That can't be good for the Strib.